Chapter 2
Chapter 2 ' ' RQs 1. Compare and contrast the characteristics of the operational, managerial, and executive levels of an organization. At the operational level of a firm, the routine, day-to-day business processes and interactions with customers occur. Information systems at this level are designed to automate repetitive activities. At the managerial level, functional managers focus on monitoring and controlling operational-level activities and providing information to higher levels of the organization. Managers at this level (midlevel managers) focus on effectively utilizing and deploying organizational resources to achieve the strategic objectives of the organization. They must make semistructured decisions, decisions that are not clear-cut and often require judgment. These decisions have some procedure to follow but not to the extent that a specific recommendation can be made. At the executive/strategic level, managers focus on long-term strategic questions facing the organization, such as products to produce, which countries to compete in, and what organizational strategy to follow. They must make unstructured decisions, which have few or no procedures to follow for a given situation. ' ' 2. Compare and contrast automating and learning. Automating: Doing Things Faster Organizational Learning: Doing Things Better Supporting Strategy: Doing Things Smarter ' ' 3. Describe the attributes of a learning organization. A learning organization is one that is “skilled at creating, acquiring, and transferring knowledge, and at modifying its behavior to reflect new knowledge and insights.” 4. List five general types of organizational strategy. · Broad Differentiation · Focused Differentiation · Focused Low-Cost Leadership · Overall Low-Cost Leadership · Best-Cost Provider ' ' ' ' 5. Describe competitive advantage and list six sources. An organization has competitive advantage whenever it has an edge over rivals in attracting customers and defending against competitive forces. Some sources include: · Having the best-made product on the market · Delivering superior customer service · Achieving lower costs than rivals · Having a proprietary manufacturing technology, formula, or algorithm · Having shorter lead times in developing and testing new products · Having a well-known brand name and reputation · Giving customers more value for their money ' ' 6. Describe the multidomestic business strategy and how it affects the flow of control information. The multidomestic business strategy uses a loose federation of associated business units, each of which is rather independent in their strategic decisions. They can be extremely flexible and responsive to the needs and demands of local markets, and any opportunities arising in local markets can be quickly seized. ' ' ''' 7. Why is successful application of innovative technologies and systems often difficult? '''Innovation is often fleeting – gains have a limited life span because of fast pace Innovation is often risky – could choose the wrong technology Innovation choices are often difficult – so many choices ' ' 8. What is the “innovator’s dilemma”? The Innovator’s Dilemma outlines how disruptive innovations undermine effective management practices, often leading to the demise of an organization or an industry. ' 9. Using past examples, explain what is meant by a disruptive innovation. '''Disruptive innovations are new technologies, products, or services that eventually surpass the existing dominant technology or product in the market. One example would include DEC’s inability to foresee the demand for microcomputers but the main examples used in Clayton Christensen’s book ''The innovator’s Dilemma are the disk drive (rapid generational change) and excavating equipment (hydraulic actuation replaced cable driven) industries. ''' 10. Describe the e-business innovation cycle. '''Choosing emerging technologies – first create jobs, groups, and processes that are al devoted to scanning the environment for new emerging and enabling technologies Matching technologies to economic opportunities Executing business innovation for growth – implement an integrated corporate-wide data warehouse enabling them to understand, react to, and better serve their customers Assessing Value – put technology ahead of strategy and marketing and realize that innovation is continuous ''' 11. What is freeconomics, and what are several approaches for applying its concepts to various industries? '''Freeconomics is the leveraging of digital technologies to provide free goods and services to customers as a business strategy for gaining a competitive advantage. General approaches are: · Advertising · Freemium · Cross subsidies · Zero marginal cost · Labor exchange · Gift economy SSQs 1. Automating '''is using technology as a way to help complete a task within an organization faster and, perhaps, more cheaply. 2. What are new technologies, products, or services that eventually surpass the existing dominant technology or product in a market called? '''Disruptive 3. Which of the following is not improving the value chain? Increasing operating costs 4. A company is said to have competitive advantage when it has gained an edge over its rivals. 5. Each of the following was described in this chapter as a source of competitive advantage except for being the subject of a hostile takeover. 6. Innovator’s dilemma refers to the emergence of disruptive innovations that undermine effective management practices, often leading to the demise of an organization or an industry. 7. What is a process of choosing, matching, executing, and assessing innovative technologies called? E-business innovation cycle 8. What international business strategy is employed by companies that carefully decide which aspect should be under central control and which should be decentralized? Transnational business strategy 9. At the managerial level of the organization, functional managers focus on monitoring and controlling operational-level activities and providing information to higher levels of the organization. 10. A supervisor’s having to decide when to reorder supplies or how best to allocate personnel for the completion of a project is an example of a structured decision. APs 1. Match the following terms with the appropriate definitions: Innovator’s Dilemma - The notion that disruptive innovations can cause established firms or industries to lose market dominance, often leading to failure Value Chain Analysis - The process of analyzing an organization’s activities to determine where value is added to products and/or services and the costs that are incurred for doing so Disruptive Innovations - New technologies, products, or services that eventually surpass the existing dominant technology or product in a market. Learning Organization - An organization that is able to learn, grow, and manage its knowledge well E-business innovation cycle - A model suggesting that the extent to which modern organization use information technologies and systems in timely, innovative ways is the key to success Freeconomics - The leveraging of digital technologies to provide free goods and services to customer as a business strategy for gaining competitive advantage Value Chain - The set of primary and support activities in an organization where value is added to a product or service Multidomestic business strategy - An international business strategy employed to be flexible and responsive to the needs and demands of heterogeneous local markets Transnational business strategy - An international business strategy that allows companies to leverage the flexibility offered by a decentralized organization (to be more responsive to local conditions) while at the same time reaping economies of scale enjoyed by centralization Operational level - '''The bottom level of an organization where the routine day-to-day interaction with customers occurs 11. Why shouldn’t every organization deploy innovative information systems? What are some of the recommended characteristics of an organization to successfully deploy innovative technologies? '''Before an organization can deploy any new system well, its processes (internal bureaucracy), resources (skilled human capital), and risk tolerance must be capable of adapting to and sustaining the development and implementation processes. 16.Find an example not discussed in the book that demonstrated the freeconomics concept of zero marginal cost. One example would be a digital format newspaper or magazine. Once the magazine or newspaper has been created and uploaded to a site, it has a zero marginal cost to allow new customers to have access to it. ''' '''Case #2 Netflix 1. Can local video stores survive in the digital world? Contrast their evolution with that of local bookstores. What is similar? What is unique? No, it simply an outdated service industry. We live in an “I want it now” society and that will mentality will only grow stronger. While book stores and video stores may seem similar in that they both sell a product that is much easier to download from home, many people still enjoy reading books on paper instead of looking at it on a screen while the video store sells a product that will be no different when you go to enjoy it. 2. Forecast the future of Netflix in regard to the advent of on-demand video where any type of video content is available at any time on any device. I believe this will eventually be a reality. I also believe that Netflix is poised to be at the forefront of this new product delivery. They already have the infrastructure and brand recognition. The company has shown its eagerness to keep its market share and its willingness to take risk in order to do so. 3. Discuss whether and how Netflix can maintain its competitive advantage. It should keep reducing costs for both the company and customers. It should continue to react to the market and new innovations. Build stronger relations with movie distributors. Continue to improve their customer database to allow it to better customize its services. Branch out to more foreign markets. Concentrate on expanding its online library more than its DVD shipping service (more profit, less marginal cost, and the market will eventually move to that format regardless). ' ' In Chapter Questions How do business firms typically get a competitive advantage? A business must have a clear vision, one that focuses investments in resources such as information systems and technologies to help achieve a competitive advantage. If any information system helps do things faster and better and helps save money, who cares whether it matches the company’s strategy? Organizations are constrained by time and money to build only systems that add the most value: those that help automate and learn as well as have strategic value.